Capital market

Types and clases of stocks which issue company

The stocks issued by the company are issued in their dematerialized form and read in the name of a stockholder, and the provisions of those regulations governing the capital market are applied to the registration of the issue of stocks, their legal holders, transfer of stocks, transfer of rights deriving from stocks, limitation of rights deriving from stocks and entry of third party stock rights into Central Securities, Depositary and Clearing House (hereinafter: Central Registry). A stock is indivisible.

A resolution on the issue of stocks, i.e. other securities has to contain all their essential elements pursuant to the regulations governing the operation of the capital market. Issuing of stocks and other securities by public offering is done pursuant to Companies Act and the law governing the capital market.

It is considered that a stockholder in relation to a joint stock company and third parties is a person who is entered in the Central Registry as a legal holder of a stock, and the day of entering in the Central Registry is the day of acquiring the stock.

Acting on request by a stockholder but not later than on the working day following the day of filling the request pursuant to the rules of procedure of the Central Registry, Central Registry shall issue a certificate of stocks legally held by him, with all data about the stocks that are kept on register by the Central Registry. Regulations governing the operation of the capital market are applied to the issue of proof of ownership over stocks.

Types and Classes of Stocks

A joint stock company may issue the following types of stocks: common and preferred stocks.

Within every type of stocks, the stocks carrying the same rights make one class of stocks. All common stocks shall always make one class of stocks.

A company may issue stocks with or without par value. If the company issues stocks with par value, all stocks of the same class shall have the same par value, and if it issues stock without par value, all company’s stocks shall be without par value.

Common Stocks

A common stock is a stock that entitles its holder to:

  • Participate and vote at a general meeting, so that one stock always gives right to one vote
  • Payment of dividend
  • Participate in distribution of the liquidation surplus or bankruptcy estate, pursuant to the law governing bankruptcy
  • Pre-emption right to acquire common stocks and other financial instruments exchangeable for common stocks out of new issues
  • Other rights pursuant to Companies Act and articles of association.

Common stocks may not be converted into preference stocks or other financial instruments.

Partly Paid-up Stocks

Partly paid-up stocks, within the meaning of Companies Act, are the common stocks based on which the stockholder has not fully performed his obligation of payment or entering contribution to the company.

A stockholder exercises rights on the basis of partly paid-up stocks in proportion to the paid-up or entered contribution, unless the articles of association provide otherwise.

A stockholder holding partly paid-up stocks of a public joint stock company may not, prior to making full payment or contribution to the company in respect of those stocks:

  • Transfer or otherwise dispose of those stocks
  • Exercise the voting right attached to those stocks.

Preferred Stocks

A preferred stock is a stock that entitles its holder to one or more preferred rights, defined by the articles of association and resolution on issuing, such as:

  • Right to a dividend in a preset cash amount or percentage of its par value which is paid in priority to holders of common stocks
  • Right to have the unpaid dividend from item 1) accumulated and paid before dividends are paid to holders of common stocks (cumulative preferred stock)
  • Right to participate in a dividend belonging to holders of common stocks, in all cases of dividend payment to the holders of common stock or upon fulfilling of specific conditions (participative preferred stock)
  • Right of priority in receiving payments from the liquidation surplus or bankruptcy estate in relation to the holders of common stocks
  • Right to convert such stocks into common stocks or other class of preferred stocks (convertible preferred stocks)
  • Right to sell these stocks to the joint stock company at a preset price or under other conditions.

Total par value of issued and authorized may preferred stocks not exceed 50% of the total company’s share capital.

Preferred stockholder is entitled to:

  • participate in the work of the general meeting without a right to vote, unless otherwise provided by the Companies Act
  • pre-emptive right to acquire stocks of the same class from new emissions
  • access to the bylaws and documents of the company as the common stockholder.

Preferred stocks may only be issued for cash contributions.

Preferred Stocks with Right to be Bought Back by the Company

A resolution of the general meeting on issuing preferred stocks may envisage that the company has the obligation and/or the right to buy them back under the terms set forth in such resolution if the issuing of such stocks and the terms and procedure of their buy-back are established by the articles of association.

A company may buy back the preferred stocks under the following conditions:

  • That the stocks are paid up in full
  • That the payment of price for stocks is made only from the reserves formed for such purpose
  • That the condition from Article 282 paragraph 2, item 2) of Companies Act is met.

Voting Right of Preferred Stockholder

Preferred stockholders are also entitled to one vote per stock within their class of stocks at any general meeting on the following issues:

  • Increase or decrease of the total number of authorized stocks of that class
  • Change of any priority right carried by the stock of that class
  • Determination of the right of holders of any other securities to carry out the exchange or conversion of their securities into the stocks of that class
  • Split and merger of the stocks of that class or their exchange for stocks of some other class
  • New issue of the same class of preferred stocks, or issue of new class of stocks carrying larger rights than are the rights carried by the stocks of that class, or change of rights carried by another class of stocks so that they carry equal or larger rights in relation to the rights carried by the stocks of that class
  • Limitation or exclusion of the existing pre-emption right to subscribe stocks of that class
  • Limitation or exclusion of the existing voting right of that class of the stocks if that right is provided for in the articles of association.

The articles of association of a joint stock company may determine that the stockholders with preferred stocks that are convertible into common stocks are entitled to vote together with the common stockholders on all or on specific issues, when their number of votes equals the number of votes carried by common stocks into which they can be converted.

The articles of association of a joint stock company may determine that stockholders with preferred stocks have the right to vote together with holders of common stocks if the dividend that belongs to them according to a resolution of the general meeting has not been paid, until such dividend is paid, in proportion to the share of those preferred stocks in the company’s share capital.

Read more:
Valuation of the contribution in kind consisting of the securities »
Change in Share Capital »
Additional payments of the company member »

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